Financial News: BoE's Mann Says Loosening Labor Market Will Restrain

BoE's Mann Says Loosening Labor Market Will Restrain Price & Wage Growth

02/11/2025 - 07:59:00 (RTTNews)

(RTTNews) - A further loosening of the UK labor market will restrain the growth in wages and prevent second-round effects from setting in, even if the near-term inflation expectations increase, Bank of England policymaker Catherine Mann said Tuesday.

In a speech, the monetary policy committee member said the current and likely continued weak demand conditions will lead to a further loosening of the labor market.

"Even if near-term inflation expectations firm on the back of the inflation hump, these factors likely will restrain pass-through to wages and prevent second-round effects from setting in," Mann added.

At the February MPC meeting, Mann along with Swati Dhingra had called for a bigger rate cut of half percentage point. The <a href=https://www.rttnews.com/3510266/bank-of-england-cuts-rate-by-25-bps-sees-modest-growth-in-q1.aspx?refresh=1 target=_blank >bank had reduced the interest rate</a> by 25 basis points to 4.50 percent, which was the lowest since June 2023.

The decision was taken against a backdrop of surprisingly weak economic activity in the second half of 2024 amid a modest further loosening in the labor market, Mann noted. At the same time, inflation was projected to rise to 3.7 percent in the third quarter before returning to the 2 percent target only at the end of 2027.

"In the near term especially, weaker activity combined with inflation expected to rise is a challenging, 'trade-off inducing' combination for a central bank," she said.

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